What Should Be Included in a Business Partnership Agreement?

 Posted on June 30, 2021 in Business Law

Of the various different types of contracts that affect a business, partnership agreements are among the most important. These types of agreements can be especially beneficial for startup companies, but they may also be used for many other types of businesses as well, including new or expanded business ventures or existing businesses that will be adding new partners or shareholders. When drafting a partnership agreement, a company’s partners will need to work with a business law attorney who can ensure that they understand their rights and the best ways to protect themselves and ensure that their business will be able to operate successfully for years to come.

Terms to Include in a Partnership Agreement

A good partnership agreement will fully detail all issues related to how the business will operate and how partners will work together to manage the company. Issues that a partnership agreement will need to address include:

• Percentage of ownership - Each partner’s ownership stake in the business will often depend on their contribution to the company, including by investing money or other assets. 

• Allocation of profits and losses - Each partner’s share of a company’s profits and losses may be based on their percentage of ownership, or other methods may be used to determine these allocations. An agreement should also specify how withdrawals of a partner’s allocated profits, or “draws,” will be handled.

• Roles, responsibilities, and decision-making - Partners may specify how they will participate in management duties and other responsibilities, and they will also want to address each partner’s authority to “bind” the business through debts or contracts. They will also want to specify how major decisions will be made, such as by having partners vote or requiring them to be in unanimous agreement.

• Dispute resolution - Partners may encounter disagreements about how the business should be run, how financial issues should be handled, or whether certain areas of the business should be expanded or improved. A partnership agreement may detail how these types of issues will be resolved, such as by stating that the partners will participate in mediation.

• New partners - If the expansion of the business requires the addition of new partners, investors, or shareholders, a partnership agreement can detail how these situations will be handled.

• Dissociation or withdrawal - If a partner wishes to leave the business at some point, the partnership agreement can specify the procedures that will be followed, including creating a buy/sell agreement that allows the other partners to purchase the person’s share of the company. These terms can also detail what will happen if a partner dies.

Contact Our Oakland Park Partnership Agreement Lawyer

If you are embarking on a new business venture, adding a new partner to your company, or looking to establish an official partnership for an existing business, Elliot Legal Group can help you draft a partnership agreement that will meet your needs. We will fully explain your rights, advise you of your options, and address your concerns, ensuring that your agreement will provide you and your business with the proper legal protections. Contact our Ft. Lauderdale business law attorney by calling 754-332-2101.

Sources:

https://www.investopedia.com/ask/answers/041015/which-terms-should-be-included-partnership-agreement.asp

https://articles.bplans.com/creating-a-business-partnership-agreement/

https://www.thebalancesmb.com/what-should-be-included-in-a-partnership-agreement-398879